Stock holders can naturally feel that at some stage this slow train wreck must come to an end and with some touting for a better second half, hope vs despair still remains a tussle. So as long as there is a tussle, we have yet to see the final capitulation , we haven't seen those circuit breakers ringing in Wall St yet. And there is still BTD going on. If we adopt a glass half full view of where we go from here, we are inclined to hope for a second half and Hold we will. But yet, the XJO has only retraced just 12% from its peak , so to call out a bottom at this point sounds rather premature. Yes you heard right our XJO isn't even in a bear market yet !
Let's look at the LT chart of the XJO, set to All View, and draw an uptrend line from the bottom to top and you can easily see that the index could easily retrace back to touch that line at somewhere close to the Covid lows around 4815 and that is a further fall of 26.8%, without violating the XJO long term trajectory. This kind of dovetails with Morgan Stanley's Mike Hartnetts 3000 call on the S&P500 (premised on recession) which is a further 20% decline. As I said before, we should expect ASX to underperform relative to S&P500 once commodities and financials start accelerating their declines (BHP and CBA holds the key to XJO, when they fall harder, we get a steeper XJO decline). Nordique retracement to its Covid low also aligns with my Christmas tree theory. And you can the same happened in 2008. Back then, peak to troughs took 16 months , if we apply that we should get a potential bottom around April 23.
